Building a business on your own might only take you so far. Tim Wixon, Head of Tech Industry at BNZ explains why it’s essential to de-risk your business by hunting with a pack.
If you’re looking to raise capital or scale up, it’s crucial to build your business and team around you to help avoid being the ‘lone wolf’ (a term sometimes used to describe business owners who fail to delegate and try and do everything themselves). My observation is that it’s potentially dangerous if as the company founder, you’re the main person selling or caught up in production, as it can be a barrier to scaling (unless you’ve found a way of cloning yourself?).
I’m not saying it’s easy. On one hand, you’re driving the business forward, innovating, selling and creating value. But, on the other hand you’re juggling all the balls in the air and growth is limited by the number of hours you have each day.
So, your team is critical if you want to own and be involved in something much bigger than you have now.
I’ve heard entrepreneurs compared to race car drivers, where the driver behind the wheel gets all the glory. Scott Dixon has won six IndyCar titles, but he wouldn’t get very far if he had to replace the tyres and fill up the tank himself each time he stopped. For your business to grow, you’ll need your own excellent team behind you.
Lone wolf problems with capital raising
The bottom line is that being a lone wolf can be a problem for investors wanting to buy into your business. Their ultimate risk is if you leave or are unable to continue, with no backup or contingency management structure in place, the business’ future is uncertain.
Re-inventing yourself away from total control can also help:
- evolve from customers wanting to only deal with you
- growing as fast as you want to
- locking in key staff so they don’t leave
- avoiding burnout (physical and mental)
- have a better quality of life with family and friends.
Ultimately the more indispensable you are to the business, the more risk for the investor, so they’ll probably want a discount on the valuation (you’ll give up more shareholding in return for the money), among other things. Key-person risk is a material consideration for a banker assessing whether to finance a business.
The Kiwi way vs the North American way
Last year I was in Los Angeles on a networking and fact-finding mission and I observed US-run companies to be more competitive and disciplined in driving leads than NZ companies, with sales being a key focus. CEOs would still help close a deal if they had to (especially if it’s a large contract), but it’s much further through the sales pipeline to save their time and focus.
This observation is backed up by tech marketing company Concentrate, who hold an annual Market Measures survey with their New Zealand clients to find out what works when selling B2B and then compares this with US data.
They found indirect marketing (email campaigns, advertising, social media, content marketing) generates 36% of leads for Kiwi companies, but for US businesses, it’s 80%! These leads are generated from the marketing and sales teams (prospecting, qualifying), where New Zealand companies tend to rely on referrals and cold calling (often by the founder, building up air miles).
In my mind, you should:
- set up your sales disciplines early
- be really clear who your customers are
- don’t be afraid to stick to your guns on what you’re offering and what you’re not
- pass on the actual delivery to others to free your time.
In the current environment, Kiwi CEOs may need to rethink their strategy while air travel is difficult, but positively it’ll speed up what we should probably be doing anyway: using partners and employees to beat the bushes for customer leads (while retaining our Kiwi approach and charm). It seems like New Zealand’s perceived competitive disadvantage (distance to global markets) is reduced for the time being.
Developing your pack
Coming up with and developing a brilliant idea into an innovative company doesn’t mean you’re great at actually running it through its full lifecycle. Many successful founders bring in skills they don’t have early into their journey, including a CEO or general manager.
To develop your pack, I think there are six leading roles to run a company well. Someone:
- with a vision and that entrepreneurial drive
- to get new customers
- to manage the numbers
- who implements systems
- responsible for delivery
- who manages people.
If all these roles are wrapped up in one person, it’s almost impossible to do justice to each and the wheels will fall off pretty fast. As the founder, you can set up your pack with people that are excellent in five of these areas (assuming, but not always, that you’ll retain the ‘vision’ piece).
The first hire
The first person to hire after the founder should be your best recruit and I think this should be someone in sales (so you can focus on strategic growth) or with other complementary skills that you need quick smart. If you’re the product tech geek, hire a CEO to run the business to give you time for product development. If you’re the CEO, hire the tech geek (anyone you can learn from will be a bonus).
The second hire (or maybe it’s much later) could be someone you’d like to work for. Down the track it’s quite possible you will, if adding a GM or CEO to run the business moves you into a board role.
Regardless of which parts you’re missing (vision, customers, numbers, systems, delivery, people), start plugging them into your ecosystem as soon as you can.
Some practical considerations:
- you need the right people to be available
- you need capital to afford to hire
- if employees are off-shore, you’re aware of local employment rules
- hire on the ability, character and integrity of the person first, skill set second
- new employees fit into your culture.
If you can, try and be ahead of the growth curve with your management team, so you’re always hiring before you need them.
Leading the pack
A key symptom of the lone wolf is asking for opinions, forming an advisory board and delegating tasks to employees and then vetoing or ignoring their recommendations to do what you intended to do in the first place. This can cause employees feeling it’s pointless presenting new ideas, so they soon stop coming up with ways to improve the business, which doesn’t help anyone.
You’ll need to buy into proper delegation and trust, which could involve external help to identify what you need and how best to set it up.
To help lead:
- know when to dial down (always taking risks makes people and investors nervous)
- accept new hires (especially a CEO or GM) will likely be more risk-averse
- take time out to develop ideas and be entrepreneurial
- take staff on your journey, explaining every step of the way, especially when you disagree with a view or recommendation
- trust and empower who you delegate to.
In the end if you can avoid being the lone wolf, you’re more likely to have a bigger business at scale with a working life that at least limits burn out – and find it easier to attract good capital with the right investor.
The information and recommendation(s) in this article are the personal views of Tim Wixon and do not necessarily represent the views of BNZ, or its related entities.
The information in this article is provided for general purposes only, and is a summary based on selective information which may not be complete for your purpose. It does not constitute, and is not intended as, personalised financial, legal or tax advice. BNZ recommends that you seek advice specific to your personal financial, legal or tax situation from a qualified adviser. No representation or warranty is made as to the accuracy, reliability or completeness of any statement made in this article. Neither BNZ nor any person involved in the content accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.
References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.